Applied's order growth was fueled in large part by display equipment orders totaling $700M, up sharply from $183M in the prior quarter and $120M a year ago. On its earnings call, AMAT said display order strength is likely to continue "over the rest of 2016," and is being driven by mobile-related OLED investments - many reports have indicated Apple plans to bring iPhones sporting OLEDs to market next year.

OLED materials/IP provider Universal Display (OLED+5.2%) is rallying. As are display panel makers LG Display (LPL+6.5%) and AU Optronics (AUO+3.2%), each of which have been stepping up their OLED investments, and industrial laser maker Coherent (COHR+2.5%), which has recently seen an OLED-related order surge.

Also: Applied's NAND flash-related orders more than doubled Y/Y to nearly $1B thanks to its customers' 3D NAND investments. That more than offset softer DRAM and foundry-related chip equipment demand. On the call, Applied suggested NAND orders will slow a bit in the second half of FY16, but remain strong overall. Foundry demand is expected to grow somewhat this year, with Applied gaining share. Industry wafer fab equipment demand is expected to be flat to slightly up.

It's forecasting similar results in Q2: revenues in the mid-$60M range (light of expectations for $72.3M), with gross margin in the mid-30% range and operating profit of $1M-$2M andj EPS of break-even to $0.01 (vs. consensus for $0.03).

Axcelis (ACLS+5.3%) has received orders from "several leading chipmakers in China" for its Purion XE wafer implanter. The systems will help design and produce 3D NAND flash and custom planar logic chips in multiple Chinese fabs.

Intel might be one of the buyers - last fall, the company announced it would invest up to $5.5B to produce flash memory (including 3D NAND) at a Dailan, China fab. Axcelis EVP John Aldeborough: "We see significant opportunity for the Purion XE because of its ability to provide the most precise dopant placement, including exacting angle control, which is critical to ensure high levels of performance and yield in [3D NAND]processes."

Two weeks ago: Axcelis pops after announcing Purion H order from DRAM maker

Axcelis (ACLS+4.7%) has shipped a multi-system follow-on order for its Purion H chip wafer implanters to a top DRAM maker in the Asia-Pac region; Samsung and SK Hynix are the most likely candidates. The hardware will be used to manufacture 20nm DRAM chips.

EVP John Aldeborgh: "We're excited to be a part of this capacity expansion at one of the world's largest chip manufacturers ... As our customers move towards advanced planar and 3D device manufacturing, they need unprecedented dopant precision to ensure the highest yields possible. With the Purion H, our team has incorporated advanced beamline technology and an innovative spot beam for precise dopant placement, coupled with the highest beam currents for optimized system performance."

The news comes three weeks after Axcelis sold off in the wake of its Q4 results (revenue beat estimates, EPS was in-line) and in-line Q1 guidance. The company joined other chip equipment makers in rallying on Friday in response to Applied Materials' earnings/guidance.

Applied's numbers come after Lam and ASML forecast demand would pick up in calendar Q2 following a soft Q1. On its earnings call (transcript), Applied forecast the wafer fab equipment (WFE) market would be roughly flat in 2016 - Gartner forecast a 2.5% drop in January, followed by 8.1% growth in 2017 and 9.1% growth in 2018.

2016 outlook: NAND flash equipment spend is expected to be up ~25% Y/Y in 2016 thanks to 3D NAND investments; DRAM spend is expected to drop ~20%, and logic spend be roughly flat. CFO Robert Halliday: "We do believe that the first half is a little bit more weighted to NAND, whereas the second half is more weighted to stronger performance in foundry, logic and DRAM. So we do see a stronger second half." Applied expects to gain WFE share in 2016, aided by strong 3D NAND and 10nm process positions.

Needham's Edwin Mok has upgraded Applied to Buy, with a $22 target. "We believe AMAT's strategy and efforts to drive growth in the Silicon, Display and [global services] businesses are finally starting to yield results, even with limited industry growth ahead. With improving gross margins and good cost control ahead, we now expect the model to deliver strong, double-digit-% earnings growth in 2-3 years, even though it is trading largely in line with other large-cap Semi names."

Update: In other news, Lam Research and KLA-Tencor shareholders have each approved the companies' planned merger. The deal is still expected to close in mid-2016.

Fellow chip equipment maker Axcelis (ACLS-9.1%) is off sharply after providing in-line Q1 guidance - revenue in the "mid-$60 million range" and EPS of $0.00-$0.01 vs. a consensus of $65.8M and $0.00 - to go with a Q4 sales beat and in-line EPS.

On its earnings call (transcript), Axcelis said it plans to seek shareholder approval for a reverse split at its May annual meeting. CEO Mary Puma: "A one-for-four reverse split would bring our share count in line with our peer group. We expect the stock split to ultimately result in an increase in our institutional shareholder base as well as provide final resolution in our earnings-per-share."

Larger equipment makers such as Lam Research and ASML have indicated industry demand will grow strongly in Q2 following a soft Q1. Intel and TSMC plan to increase capex in 2016 (with Intel's growth coming off depressed levels); Samsung (an Axcelis client) is expected to cut capex due to lower DRAM-related spending. Axcelis received several earnings call question about memory spending.